British taxpayers ordered to bail out euro
Quote:All 27 EU finance ministers have been summoned to Brussels on Sunday to sign up to a “European stabilisation mechanism. Britain will be unable to veto this as it will be put through under the “qualified majority voting” system.
The deal, effectively to shore up the euro, was denounced as a “stitch-up” last night after it emerged Nicolas Sarkozy, the French President and Angela Merkel, the German Chancellor, had devised it behind closed doors and were attempting to push it through at a time when there is no clear government in Britain.
It was declared a "done deal” by the 16 euro zone leaders who met in the early hours of Saturday morning.
The decision was taken as David Cameron was locked in talks with the Liberal Democrats to try to form a government.
Alistair Darling, the Chancellor, will fly to Brussels for the meeting after promising to keep George Osborne and Vince Cable, his Tory and Lib Dem counterparts, informed. EU finance ministers have been given the deadline of midnight tonight to agree the highly sensitive but rushed proposals to protect the single currency from financial turbulence from the Greek debt crisis.
“When the markets reopen Monday we will have in place a mechanism to defend the euro,” said President Sarkozy yesterday. “This is a full-scale mobilisation.”
Euro-zone leaders are attempting to get round objections from countries such as Britain by invoking Article 122 of the Lisbon Treaty, intended to enable a collective response to natural disasters. This does not need unanimous agreement.
By doing so, Mr Sarkozy has ensured a speedy confrontation with a new British prime minister and other leaders of non-euro currency countries. All 27 EU finance ministers must be present, but because decision will be taken by qualified majority vote, the 16 euro zone leaders can ensure its passage.
British exposure to liabilities created by a bail-out under the scheme would amount to around 10 per cent of the total loan. If a country failed to repay, the cost to Britain would be ¤10 billion (£8.6 billion) for every ¤100 billion on which it defaulted.
The scheme will present an immediate dilemma for an incoming Conservative government. A bail-out would increase British liabilities and debt at a time when Mr Cameron would be seeking to restrain spending.
Refusal to lend the money would plunge a Tory prime minister, overseeing a coalition or minority government, into a damaging conflict with the EU.
Euro-zone leaders took the decision as a two-hour dinner on Friday stretched into nine hours of tense negotiations.
Action is being called for because Spain and Portugal are showing the same early symptoms of crisis that Greece showed three months ago. Borrowing costs for indebted euro-zone countries have soared amid signs that market fears could spread across all EU countries, including Britain.
José Manuel Barroso, the European Commission President said: “We will defend the euro, whatever it takes.”
British officials are concerned that the EU is preparing to use the sweeping Lisbon Treaty clause as the legal basis for a European bailout scheme.
Under the clause, an EU member state hit by “natural disasters or exceptional occurrences beyond its control” can receive “financial assistance” after a qualified majority vote by European leaders.
Supporters of the plan argue that “exceptional circumstances” includes market “attacks” on the euro.
”The euro’s 16 countries have already agreed it - that’s a majority," said a diplomat. "It’s a fait accompli. Those not in the euro - Britain, Poland, Sweden and other new EU members - can’t stop this."
Officials and diplomats have confirmed that Gordon Brown, the Prime Minister, was the last non-eurozone leader to be telephoned on Friday night by José Luis Rodríguez Zapatero, his Spanish oppositer number, to be warned about the EU plan.
Europe’s failure to contain Greece’s fiscal crisis last week triggered a 4.3 per cent drop in the euro and threatened to spark a global debt crisis.
Mats Persson, the director of Open Europe, said that while euro zone stability was in Britain’s interests, the bailout deal was not.
”This latest move could make British taxpayers liable for the debts of governments over which they have no democratic control - to the tune of billions of pounds,” he said.
”A British government, of whatever persuasion, must really consider whether it should take part in centralised EU borrowing on this scale, not least since such facilities were always considered illegal under the EU treaties and wholly undemocratic.”
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